| By :
Mark Jenner
Everybody would prefer not to have to seek outside finance for their new business opportunity. Interest costs can be high and you have to repay capital too. However, not everybody can use their own resources. If you follow a few rules you should be able to easily secure your finance. Finance can be obtained from a number of sources for your new business. These can include drawing down your own savings or pension funds, borrowing from family or friends and borrowing from commercial organizations such as banks and building societies. In most cases, it will be necessary to use a mixture of sources, as organizations will usually only lend to you if they see that you are prepared to risk your own money as well. Whether you use your own money or obtain it from a commercial source, you should have a detailed business plan prepared for your new business. Not only will this assist a bank in deciding whether or not to lend to you, it is an essential exercise that can tell you if a business is viable or not. A business plan is fundamental to any business starting up, and any lender should turn you away if you do not have one prepared. Not only will a business plan provide details of the proposed financial performance of a business and the associated assumptions you have made in arriving at this, but also will examine the market place, competition, available skills, threats to the business and sensitivity to problems that may arise. These details are just as important as an estimate of the amount of money you think you might make. The lender will assess your business feasibility and the amount of money you are asking for. Generally they will then lend if the amount looks reasonable and the business plan is sound and indicates that repayments will be made comfortably. They will also seek some form of security over the loan they may be prepared to advance you. Security can be given over any type of asset, from a property you own such as your house to the value of the debts your business may have. Normally the lender will want security they can easily realise if your business runs into difficulties and defaults on the loan. In some cases they will accept a personal guarantee from you or someone else, though any guarantor should have some financial standing for this to be possible. It may be possible to obtain funding in the form of a mortgage over your house or other property without providing a detailed business plan to the lender. By lending you only a proportion of the property's value but have security over the whole, they will feel much safer. This means that they can force a sale of your property to repay your debt and can sell at less than market value. In such cases it is just as important that you prepare a business plan for yourself as you must be satisfied that your business will work. Remember that a lender will expect to make money from you when it advances you funding for your business and will want to minimise the risk it faces. So you should attempt to be accurate with your estimates included in your business plan and certainly include a generous element for the unknown.
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